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Treasury Secretary Steven Mnuchin said Friday that President Donald Trump respects the independence of the Federal Reserve and the president’s recent comments were simply a reflection of the fact that he favors low interest rates.
“The president has been clear,” Mnuchin said in an interview with CNBC. “He likes low interest rates.”
Mnuchin, who praised Fed Chairman Jerome Powell, said the president understands that the Fed is doing its job.
Trump this week has blamed the market’s big sell-off on the Fed’s interest rate increases, saying “the Fed is out of control.” But Mnuchin disputed that Trump’s comments represented an attack on the Fed.
“He doesn’t feel the need to attack at all,” Mnuchin said. “The president is concerned about the Fed raising interest rates too much and slowing down the economy. And those are obviously natural concerns.”
Mnuchin said he viewed the market turbulence as a “natural correction after the markets were up a lot” rather than a sharp plunge triggered by bad news on the economy.
“I think the fundamentals are still very strong,” Mnuchin said. “Markets tend to go too far in both directions and they have natural corrections.”
Mnuchin was interviewed in Bali, Indonesia, where he is attending global finance meetings including the annual meetings of the International Monetary Fund and the World Bank along with Powell, who is representing the Fed at the meetings.
Mnuchin met on Thursday with Yi Gang, head of China‘s central bank.
“We had a constructive discussion around currency,” Mnuchin said. “I expressed my concerns about the weakness of the currency.”
Mnuchin said in the discussions he had with the Chinese they had made clear that they did not see a further weakening of the Chinese yuan as being in their interests.
The Chinese currency has been falling in value against the dollar in recent months, raising concerns that China is devaluing its currency as a way to make Chinese goods more competitive against U.S. products.
The United States and China are currently locked in an escalating trade war with the Trump administration imposing penalty tariffs on billions of dollars in Chinese goods and China retaliating by targeting U.S. products including soybeans for penalty tariffs.
Mnuchin did not report any breakthroughs in his discussions with the Chinese but he indicated that Trump may meet with Chinese President Xi Jinping during a summit of leaders of the Group of 20 biggest global economies in Argentina in late November.
“We’re having discussions about a potential meeting,” Mnuchin said, indicating that the two leaders could meet if the U.S. side felt the trade discussions were moving in a positive direction.
The Treasury Department is expected to issue next week its twice-a-year report on whether China or any other country is manipulating its currency to gain trade advantages.
Mnuchin would not say what the report would reveal, but in the past Treasury has placed China on a watch-list but said it did not meet the requirements to be labeled a currency manipulator.
Concerns have been raised that China, the largest foreign holder of U.S. Treasury bonds, might start dumping its holdings as a way to bring more pressure on the United States in the trade dispute. But Mnuchin said this possibility did not concern him because it would not be in China’s economic interests to start dumping its Treasury holdings.
“That would be very costly for them to do,” Mnuchin said. “It’s not something I’m at all losing any sleep about.”